Thursday, May 18, 2006

Citibank e-Savings account

I recently wrote about the savings rates on various on-line banks versus the Fidelity money market funds. At the time, the Fidelity rates were better than all the popular on-line banks.

As a quick update, I came across a new offer from Citibank today for an "e-savings" account with a rate of 4.75%. There are no minimum balances.

Although the rate is slighly higher, we are only talking about 0.13% versus FDRXX. On $10,000, this difference only equals about $1 per month. Hardly worth opening another account if your money is already in Fidelity, but might be worth it if your looking for a new account.

Wednesday, May 17, 2006


Another down day, this time due to higher than expected headline and core CPI numbers (0.6% and 0.3%, respectively, versus 0.5% and 0.2%, respectively forecasted). The Dow ended the day 4.3% below it's 52 week high set within the past couple of weeks, The Nasdaq and S&P are 7.5% and 4.3% below their 52 week highs.

As you can see, the Nasdaq and S&P are now both oversold -

The Dow remains slightly above oversold territory -

Meanwhile, the VIX hit it's highest levels since October 2005.

So what next? Although I believe in the near-term, we could be bottoming out, I continue to be less optimistic about the longer-term prospects. Be careful out there, and I'll see you tomorrow.

Fund Focus - Fidelity Floating Rate High Income Fund (FFRHX)

The Fidelity Floating Rate High Income Fund (FFRHX) inception date was August 16, 2000. Since that date, the Fund has averaged an annual rate of return of 4.5%.

Fund Summary - This High Yield Bond Fund invests in Corporate floating rate loans. These loans do not have fixed interest rates, but rather, have fluctuating rates based on set benchmarks (i.e. an example of the rate would be LIBOR + 4%). These loans are often lower-quality debt securities.

Returns - 5.53%, 4.86%, 4.32%, 4.5% (1 yr, 3 yr, 5 yr, life). YTD return for 2006 is 2.16%. 30 day yield is 5.76%.

Holdings - As of March 31, 2006, the Fund has 391 holdings diversified across numerous sectors (the largest being Cable TV - 13%). 99% of the loans were rated BB or lower.

Fund Manager - Christine McConnell. Over 5 years managing this fund.

Expenses - 0.82% versus peer average of 1.20%. There is a short term trading fee associated with this fund of 1% for a redemption within 60 days.

Morningstar Rating - 2 stars

Minimum Investment - $2,500

Conclusion - BUY. Unlike normal bond funds, whose price decreases as rates increase, FFRHX consists of floating rate loans. The value of these loans do not fluctuate with changes in interest rate since the underlying interest rate associated with the loan also fluctuates. Potential investors should be cautioned that the fund invests in lower quality debt. These type investments carry an increased risk of default. We believe the manager of the fund has shown consistent performance in balancing this risk, limiting the overall exposure through diversification. With the 30 day yield currently 5.76%, we believe this is an attractive investment for a small portion of your overall bond allocation.

Monday, May 15, 2006

Recent Fidelity Money Market yields

If there is any benefit about the Fed's 16 rate hikes since June 2004, it is that money market rates are finally worth noting. Here are a few examples of Fidelity money market rates as of today -
  • Fidelity Cash Reserves (FDRXX) - 4.6%
  • Select Money Market Portfolio (FSLXX) - 4.66%

These rates compare to the following savings rate by some popular on-line banks -

  • ING Direct - 4.15%
  • CapitalOne Savings - 4.55%
  • Emigrant Direct - 4.5%

As you can see, the Fidelity fund rates have all surpassed the most popular online banks. If you are currently earning less than 4%, please do yourself a favor and at least transfer your cash to one of the online banks. The Fidelity funds each have minimum deposit requirements of $2,500. The online banks do not have any minimum requirements.